Ireland's decision to join the euro had contributed to "an extremely overheated housing market" in the Republic and rising consumer borrowing, according to Mr Eddie George, governor of the Bank of England.

On a visit to Belfast yesterday he said: "You're seeing exactly what you would have expected if a country where the economy was already growing very strongly suddenly had to adapt to much easier monetary policy than it had before," said Mr George. He said it was "premature" to draw any lessons for the UK from the Irish experience, but "what will be interesting is just how inflationary the situation turns out to be".

Meanwhile, the British government moved yesterday to clarify its position on euro membership. Stephen Byers, the UK trade and industry secretary, yesterday sought to reassure inward investors by confirming that the government hopes to hold a referendum on British membership of the euro early in the next parliament.

His statement follows several weeks of uncertainty about the government's intentions. A Treasury official recently said the euro referendum could be several years away.

The prime minister's spokesman said yesterday "the plan" was for the Treasury's five economic tests on euro membership to be met early in the next parliament.

But he said if the tests were not met at that time, the government "would not necessarily" declare it.